What is it?
A scheme that gives you free insurance cover if you invest in one of the 17 specified mutual funds of Reliance Capital Asset Management Ltd through a systematic investment plan (SIP).
What do you get?
The company will cover investors under a group term insurance cover. The insurance cover is available to you until the last instalment of your SIP or till age 55, whichever is earlier.
The insurance cover is equal to the unpaid pending SIP instalment up to a maximum of Rs10 lakh. So if you choose to open an SIP of, say, Rs5,000 in a specified fund for five years and in the second year you die, the nominee would be entitled to the pending SIP amount, which in this case would be Rs1.2 lakh. The company will keep putting this pending amount in the SIP on behalf of the nominee till the chosen term. When the term ends, the nominee will get the SIP proceeds. However, this is not applicable for Reliance’s equity-linked savings scheme, Reliance Tax Saver ELSS fund, where the nominee gets paid on death. In the case of Reliance Tax Saver the nominee can have the proceeds at his disposal.
What to watch out for
For the life insurance cover to be applicable, you have to regularly pay your SIP instalments. If you default on payment of two consecutive SIP instalments or you default on four separate occasions during the tenor or if you default before attaining 55 years of age, whichever is earlier, the insurance cover will cease. You will also not enjoy an insurance cover if you redeem, discontinue or switch out units before the SIP tenor ends.
Once you lose the insurance cover you can’t revive it.
What are the costs?
There is an exit load applicable if you opt for the insurance cover. The exit load is of 2% of the fund value and is applicable if you redeem, discontinue or default before the SIP matures or before completing 55 years of age, whichever is earlier. This is also applicable in case the nominee wants to withdraw before the tenor ends.
Mint Money take
Of the 17 specified schemes, only two make it to Mint50, our recommended list of top 50 mutual funds. These are Reliance Diversified Power Sector Fund and Reliance Regular Savings Equity fund. If you wish to invest in these schemes, you can opt for the insurance cover. But beware of the exit load and conditions under which you can lose the cover.